Posts Tagged ‘managing change’

The public debate about the introduction of video action replay “VAR” at this year’s World Cup is largely centred on a binary question: is the technology applied accurately or not by the officials? The real question that John Naisbitt talked about in his book “High Tech, High Touch” is are we happy with the consequences of technological change on our lives, relationships and societies, at a macro and micro level? That is a far more profound question, about any new technology that we might bring into our business or home. The only certainty is that we are not “neutral”.

Back in 2014, HSBC triumphantly announced a dedicated pool of $200 million to fund an innovation team and direct capital to young entrepreneurial fintech businesses. It has made some small bets in the intervening years and housed 3,000 digital techies in a separate London building because in the words of then CEO-Stuart Gulliver “we have a cultural issue.” Yet these actions masquerade a more profound Board and Senior Management issue: a fierce split has persisted for over 5 years about the priority that should be given to innovation, and the probable return on the time invested.

If innovation, internal or external, is truly critical to the business or profit centre’s future, why wouldn’t it sit within individual P&L’s, and the accountability reside with the appropriate P&L leader? When large organisations persist in setting up innovation labs, accelerators and dedicated corporate venture units too often they are “divorced” from the cut and thrust of the day-to-day business. They point to an unspoken truth, innovation isn’t really a strategic priority for certain powerful voices and/or the environment is insufficiently supportive of bold ideas or foreign bodies. Which is it? Common sense dictates that those leadership issues must be fixed first BEFORE investing a dime on innovation initiatives.

Days of old: more strawberries and cream. Wooden rackets. Bjorn, Jimmy, BigMac, Pete, Andre, Rod, BillyJean, Monika, Martina, Steffi. Intermittent rain delays. Images that are indelibly linked in our minds to a time and place. Yet a (sporting) institution and participants that has successfully embraced reinvention.

When you look at your own personal and business reinvention, what are the strongest images in the minds of your key constituents (clients, investors, employees, business partners and so forth)? Does it say more about your “past” value, your “present” value or your “future” value? Perception is reality. What are you doing regularly to adjust others perception of you? (new interests, new relationships, new ideas, new surroundings, new images etc.) Is it bold enough for your current and future circumstances? (changes in technology, competition, market needs, client experience, and so forth)

Why wait for the umpire’s cry of “new balls, please”, when you can better control your own destiny?

Sitting on a EasyJet plane last night in Nice’s Côte d’Azur Airport minutes after boarding and the Captain gets on the microphone apologising that due to inclement weather on route, we must wait 55 minutes on the tarmac in Nice because “he needs to free up the gate”. He then invites those who would like to look around the cockpit to pay him a visit when the engines are off.

Kudos for the leader of the ship for addressing the audience and his openness to entertaining the frustrated passengers (quite how that is squared with EU security protocols preventing access to the cockpit is something of a mystery). Yet the obvious thing to ask is why would you ask 170 customers to be inconvenienced to a great extent in boarding a plane that you know is going nowhere for a considerable amount of time? Why couldn’t you move the plane 200 metres to another stand?

Perhaps you don’t care or perhaps the airline’s priority is more important than that of its’ customers comfort? I see the same thing in a number of businesses. Think about the unnecessary inconveniences that you are asking your customers to tolerate for your benefit? What stops you changing your behaviour and applying common sense? Is it a material or immaterial reason (safety or Company Policy)?

Too often our best intentions to manage customers expectations are largely overlooked because we insist on dumb decisions which are clearly not in our clients’ best interests.

Donald Trump follows through on one of his campaign promises and there are cries of “quelle horreur” and “nein” from his European partners, at the mere thought of any re-negotiation. It begs the very same question in your business, are you putting too much emphasis on signing a contract, and too little on continuing to nurture a peer-level trusting relationship and creating alternatives, where the original signatories (investor, customer, employee or business partner) may change, and the anticipated value derived from the deal is in all likelihood a long way in the future?

Is this a shot from your evening last night, soon to be posted on your instaGLAM account? Today a great many executives, managers, investors and board members are busy trying to be someone that they are not. Fact. They are instantly recognisable by the disparity between the image that they project and what others see.

At a small intimate event last night in London with David Nish, the past CEO of Standard Life and this week appointed as a Non-Executive Director at HSBC, we discussed the dynamics and consequences of this behaviour.

The dynamics and behaviour are largely the same in businesses of every size. Individuals are prone to projecting views without hard evidence or strong anecdotal information (shout loudest). They are poor listeners (routinely ignore vital feedback). They lack sufficient self-worth in their own talent and judgement (resort to bolstering their credentials with references to famous names). They have a poor level of self-esteem (they are dismissive of others success). They are prone to passive aggressive behaviour to project superiority (constant one-upmanship). They are prone to excessive exaggeration or downright lies about their own success (false claims in bios, CV’s/Resumes). We’ve all met them at various points in our career.

The consequences differ based on the size, priorities and complexity of the organisation. Here are some observations from my own experiences:

An inability to effect a management buyout of a small or family business, where the Founder’s behaviour results in management never acquiring the skills, traits or expertise to run the business in his or her absence.

A loss of respect for a private investor’s judgement amongst their peers and future co-investment opportunities when they make wild, unfounded claims to be invested in the “next unicorn“. Ridiculous, of course but sadly all too often true.

Raging management distrust in the Board when a non-executive director relays unsubstantiated “insider” claims from a key client, institutional investor or employees about the manager’s negative performance without hard evidence or strong anecdotal information.

A destruction of goodwill amongst analysts and the media when the newly appointed CEO of an investment bank, self-invested with “superman” powers, promises near instant changes to the business model that his predecessors have taken decades to create.

The world is littered with people trying to be someone that they are not. Facebook, Instagram and Twitter couldn’t survive if that human need dissipated. We all have a reputation that precedes us in the hyper-connected world we live in. Reinvention, acquiring new skills and educating others is something that we must constantly commit to but without absolute credibility (tangible results and visible behaviour), it is just an illusion.

I have long been fascinated by how people and businesses apply “conviction” (beliefs, investment, action) when there is an immediate requirement for “reinvention”.

In 1999, opposite where I worked on Hollywood Road in Hong Kong was a large commercial real estate company, whose business was fitting out and renting shared service offices. For many years it had a unremarkable name and neon sign over the 1960s building, overnight it added the sobriquet “.com”. Curious I asked a friend who worked in the building what was happening, “Oh the Chinese owner thought because tech is red-hot right now, why not change the name of the company. Don’t worry as tenants we have seen no changes.”

Now you might not be as brazen in convincing your target audience à la Donald Trump and Mitt Romney that your polar opposite views are instantly credible but there is a mindset change needed first to kick start reinvention. Here is 3 simple questions, apply it to any situation you personally or the organisation are experiencing:

What are the beliefs that inform my convictions today about how I and/or the business needs to look in 12 months time? (relationships with clients/investors/ employees/regulators, changing customer base, financial condition, valuable and profitable offerings, discretionary time and so forth)

How do I apply those convictions today to where I/we plan to invest tomorrow? (capital deployment, people, innovation, strategy implementation)

I can barely think of a sector where the nature of work is not changing dramatically today. With it comes fear (irrelevant, loss of clients or even, unemployed) and opportunity (new investment in new products and services, new markets and new roles).

People believe what they see, not what they hear or feel. If you really want to convince me today that you are serious about reinvention, I want to see immediate changes of attitudes and behaviour amongst influential figures in the business and new, impressive results fast.

If you are willing to be intellectually honest, click on the link below. Ask yourself where do our current attempts sit on the chart and where do they need to be in the future. The distance between the two points is indicative of the small step or giant leap your business and key people need to take.

Endless needs analysis informing our future strategy (AIG), managers preoccupied for hours creating and talking to the media about our “new culture” (Anthony Jenkins at Barclays) or changes to the plaque over the building door won’t cut it for customers, investors, employees and regulators, however, well intentioned. It isn’t easy but I need to see in your actions that you really believe what you are saying, not merely spouting platitudes to buy time or protect your ego.

It is over 60 years since Gucci first launched their classic loafer. Yet the almond shaped loafer remains timeless. Each generation has seen the snafflebit shoe undergo reinvention and adaption to the contemporary tastes of new and existing buyers, sales and pricing are higher than at any point in the product’s history. .

On Wall Street, Leadenhall Street and Queen’s Road bankers, brokers and investment managers, some of the brand’s most fervent fans, are immersed in urgently re-casting and re-inventing their own “classics”. Products and services that have been a cash cow for the firms’ success (fixed income instruments, catastrophe reinsurance and ETF’s) are at risk falling out of fashion, indeed in some cases obsolescence. Accelerants such as new sources of capital, new technologies and new regulations loom large in the rear view mirror. New products and services offering more impressive outcomes flirt and seek to lure loyal fans and their money. How do firms respond quickly and effectively? How do they ensure that their classics remain relevant for a new and “old” buyers alike? Here is the jump off point:

1. What is the ultimate result our ideal buyers want to achieve today and in future? (capital preservation, capital growth, financial security)

2. What alternatives exist with our existing product or service to meet this goal? (unbundle, re-package, re-cast)

3. What alternatives can we create with our existing product or service that better meets those goals? (new markets, new modes of distribution, new ways to integrate new technologies, capital and regulation)

4. What are the risks and rewards attached to each alternative?

5. How do we best minimise or control the risk and maximise the rewards?

6. How much risk is the organisation willing to accept in return for an appropriate level of reward?

To paraphrase, Albert Einstein, we cannot solve our clients problems with the same thinking we used when we created them. In much the same way we need to first change our thinking about our clients needs and the utility of our best selling products and services to solve them.

So you are the proud owner and as CEO, guardian of the new combined business, the hard work now begins, turning the reasons why you bought the business (investment thesis) into an organisational reality.

You assemble the executives and managers in both firms with guidance on the strategic vision, financial synergies, operations, talent and culture. In all likelihood, they have interacted briefly to exchange information in the due diligence, negotiation and closing phases but they have rarely got to know each other on a personal basis.

How each party sees that you handle that first integration meeting in most cases creates an indelible impression for the ensuing relationships, the level of commitment to your objectives and your probable success.

Knowing “what to do” and “how to do it”, is largely a mixture of art and science for most leaders. “Art”, in the sense of gut feel and good judgement in creating a welcoming environment for the newly acquired executives and managers. “Science”, in the sense of knowing precisely like choreographing a play “what” business outcomes must be prioritised, “where” to devote time productively, “when” you must accelerate the conversation (agreed action points) or intervene to bring circular conversations to a close and “why” a chosen integration alternative is appropriate.

Here is seven “integration killers” you want to avoid in that first meeting of the “new” colleagues:

1. Ambiguous and Unclear Meeting Invite. The focus needs to be on performance-based priorities (crystal clear business outcomes) not tasks and activities (“getting acquainted with each other”).

2. Inviting Wallflowers. Peers want to meet, talk and reach agreement with peers or possibly employees who are one grade above. They don’t want to converse with subordinates, who cannot contribute meaningfully and do nothing more than to act as a “posse” or mute cheerleaders for an executive or senior manager.

3. Enabling People Who Arrive With An “Agenda”. Nothing kills an integration meeting like an HR person from the acquiring company, who arrives with an arbitrary alternative (“non-negotiable” policies and procedures) to force the newly acquired employees to comply to their process without first listening to and collectively examining whether it makes sense. The real crime is the facilitator who allows them to make a speech and enables their passive-aggressive behaviour.

4. Leaders Whose Behaviour Precisely Undermines The Meeting’s “Rules of Engagement”. If the understanding is that PDA’s and phones are to be switched off until the scheduled break, there is zero excuse for the leader, who blatantly ignores the rule. What the leader’s behaviour says to the other participants is “this discussion is not my priority”.

5. Kick off at the wrong starting point (integration alternative). Any discussion must start with “what is the desired business outcome?” (rapid reduction in business acquisition expenses), “what are the integration alternatives?” (adopt Company A or B’s sales approach or develop a new approach), “what is the risk and reward attached to each alternative?”, and ends with “what action is required to rapidly and effectively implement the preferred alternative” (next steps). Nothing else.

6. Priorities are given an arbitrary score (“7”) or (“High”). Organise and separate priorities into three headings (“GSI”): “Gravity”, what is the gravity of the issue? “Speed”, how fast does this need resolving or improving? “Impact”, what is the actual or potential impact on the firm’s future? Use actual descriptive sentences not scores.

7. Lack of definitive “next steps” with agreed action points (“I’ll discuss this with the COO when I next see him”). Every action point must have a time, date and accountability given to it with an understanding of the supplementary action to follow.

My observation is that most first integration meetings start with the very best of intentions. Where they go awry is that the meeting chair and participants overlook the importance of speed as well as quality. “Speed” in terms of, for example, identifying decision-making shortcuts that enhance the quality of the results (more impressive financial synergies, happier customers). “Quality” in terms of asking the right questions in the integration meeting to enhance the “speed” of accomplishing the desired business outcomes (ease of implementation, reduced risk).

McKinsey has cottoned on to what I have been saying for several years. The insurance sector’s obsession with data and analytics is irrelevant if the management of the businesses aren’t willing or able to change their beliefs and attitudes.

In a year when weekly landmark deals have rained down like confetti in all corners of the industry, it raises the following questions:

Why is the industry is so in love with hiring C-level executives from within?

If so many leaders are poorly qualified or unwilling to address business complexity, operating models, IT and performance management as McKinsey suggest, why aren’t Board Chairs and shareholders more assertive in casting a wider net?

What would it take to attract leaders with the skills and volition to challenge widely held beliefs and make meaningful changes that transform insurers’ operating performance?

Therein lies the key future challenge for the sector and the experts who are able to help answer those valuable questions will be able to charge whatever they want.